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Foreign Ownership of South African Wineries

13 December 2018 - Monique Demes

The recent purchase of Warwick and Uitkyk wine estates by Eileses Capital, a US-based investment fund, has sent many a tongue a wagging about the exact role international buyers currently play in the South African wine industry.
There seem to be two steadfast factions (for the most part): those for it, and those against.

The fact is that foreign investors now have a stake in approximately 100 South African wine estates, which is about 16% of the total. The owners are mostly Dutch, French, British, German, American and Swiss, although countries such as Israel, Russia, Singapore, Australia and the Congo are also piling in. Unbeknownst to many, however, is that South Africa has foreigners to thank for its auspicious foray into wine production. The Dutch East India Company was the first foreign investor on the scene, shortly after Jan van Riebeeck established the Company’s settlement in 1652. Simon van der Stel, also a non-national, further advanced the industry by making available written guidelines for grape-farming, as well as implementing valuable practices at Constantia that are still utilised today. An added benefit was the arrival of the French Huguenots thereafter, who further broadened the colony’s winemaking expertise.

The first wave of modern-era wine farm procurement in South Africa dates to the early 1980s. A few intrepid investors – not put off by South Africa’s pariah status – decided to take advantage of the reduction in property prices. One such pioneer was a German banker by the name of Hans Schreiber, who acquired two farms in the Stellenbosch region, namely Stellenzicht and Neethlingshof. He commenced with a comprehensive renovation programme and elected to replant vineyards in order to produce market-ready, new style wines. There have been countless others since then, with both the volume and value of these purchases gathering steam in the post 1994 era. Endeavour as one might to compile an all-inclusive list, it is suffice to say that the extensive resources these figures have contributed have made the advancement of our wine industry possible.

A Californian winemaker by the name of Zelma Long beautifully illustrates this sentiment. Long, a venerable icon in the industry, established Vilafonté in Paarl circa 1997, together with viticulturist husband Phil Freese. Mike Ratcliffe, co-owner of the estate, explains that Long is at the centre of an enterprise intending to do something that no one has ever done before: create a wine designed for export to American wine drinkers – from South Africa. Long and Freese take pride in the fact that they aspire to producing wine worthy of global export not as interlopers, but as long-time participants in the South African wine sector.

One of my favourite trailblazers worth mentioning, however, must be May-Eliane de Lencquesaing. After arriving in South Africa via France, she proceeded to purchase a run-down fruit farm just where Ida’s Valley joins up with Stellenbosch. In 2003, she began the slow and arduous process of transforming it into a model wine estate. Roads had to be laid out, vineyards had to be planted from scratch, a winery had to be built, and the farm buildings needed to be restored. Taking on a project of this magnitude would be a formidable challenge for any landowner. De Lencquesaing, however, succeeded in this undertaking just shy of her 80th birthday, and is still going strong. Glenelly has now grown into a flourishing wine business, exporting roughly 60% of its production at prices which match the returns on domestic sales – a rarity among South Africa’s producers!

May-Eliane de Lencquesaing from Glenelly

Another well-known international figure is that of Donald Hess, Swiss entrepreneur and founder of Hess Family Wine Estates. In 1978, Hess’s purchase of vineyards on Mount Veeder in the Napa Valley launched the start of a portfolio which now includes wineries and art museums in California, Argentina, and South Africa. The latter came to pass when Hess acquired Glen Carlou Vineyards in Paarl circa 2003. Just three years later, the Hess Museum of Contemporary Art was opened – Hess’s private collection of meticulously-sourced paintings, sculptures and installations. 2016 saw the sale of Glen Carlou to Pactolus Consortium, headed by Wayne Pitout. Timothy Persson, CEO of Hess Family Wine Estates, said the move to Pactolus would allow Glen Carlou to take full advantage of the emerging interest in South African wines. “The new owners bring with them not only a wealth of business acumen, but most importantly it is their enthusiasm, support and energy which will see a re-invigoration for Glen Carlou” explains Persson.

Paul Boutinot, custodian of Waterkloof wine estate, is another individual who has managed to carve himself a foothold on the rung of foreign investors. Following a classic apprenticeship in the UK wine trade in the early 1970s, Paul launched his own successful wine import business – Boutinot – in 1980. In 1993, Paul began the search for a farm of his own. What he soon found, however, was that the classic areas able to grow naturally balanced grapes – such as the Cote d’Or, Chablis, Paulliac, Barolo, etc. – were either unavailable or unattainable. Ten years later his search finally bore fruit when he discovered a small area on the slopes of the Schapenberg, in between the Hottentots-Holland and Helderberg mountains. And thus, Waterkloof was born.

In 2013 Paul’s international wine business was bought-out by its management team, led by Managing Director Dennis Whiteley. Whiteley and his team has been with the company since the mid-1990s, explains Paul, and handing over the reins would give him a chance to focus on the conversion of Waterkloof to a fully-fledged biodynamic farm. It is here where farm manager Christiaan Loots helped turn the 120-hectare property into the biodiversity gem it is today. Paul’s genuine love and care for the land is quite visible – Waterkloof is one of the first wine estates in South Africa to be awarded WWF Biodiversity and Wine Initiative Champion status. His private investment in the farm is not that of the classic foreign-based lifestyle investor, but rather as a hands-on dedicated entrepreneur-cum-winemaker.

Another farm that deserves an honourable mention is that of Marianne, a boutique wine estate nestled on the foothills of the Simonsberg Valley, just outside Stellenbosch. Owned by Frenchman Christian Dauriac – who owns three chateaux in the Bordeaux area – the farm was established in 2004 with the idea of bestowing some Bordeaux pampering upon some of the Cape’s finest. Dauriac explains that after arriving in the Cape, he and Michel Rolland – an eminent Bordeaux-based winemaker – carefully set about creating a blueprint to produce French-style wines. “Although we clearly had to recognise the Bordeaux’s 2000-year-old winemaking heritage,” says Dauriac, “an important factor for us was to pay homage to the terroir of the Cape as well. Our dream was to combine both the Old and the New World; to make wines as close to our vision of perfection as possible”.

Analjit Singh, one of India’s most successful entrepreneurial businessmen, is also a key role player in South Africa’s wine sector. Singh made his maiden investment in South African property in 2012, when he bought Klein Dassenberg Farm in Franschhoek. Von Ortloff and Dieu Donne were soon acquired thereafter. The three adjoining farms now form Leeu Estates, SA’s first wine tourism initiative by an Indian investor. Singh has done his best to preserve the heritage of the region, as is made apparent by the restoration of the historic Cape Dutch manor house, which now includes a library containing both Gandhi and Mandela memorabilia. The town of Franschhoek itself has also reaped the fruits of Singh’s contribution – the extensive construction boosted employment with at least 400 jobs, and Singh is closely involved with various charities in the area. The Isabelo Feeding Scheme: Sharing is Caring project is one of these, an organisation which helps feed disadvantaged schoolchildren in and around Franschhoek. The Kusasa Project, a charity which offers educational and sporting support, is also a benefactor of Singh’s philanthropy. In 2013, Singh went on to sign a joint venture with winemaking couple Chris and Andrea Mullineux, for 50:50 ownership of their Riebeek-Kasteel winery. “The winery was rechristened Mullineux-Leeu Family Wines – out of respect for what they had achieved. It was the first time I had ever agreed to put another name before “Leeu” on one of my companies,’ says Singh. (Singh in Sanskrit also means lion).

Leeu Estates, Franschhoek

Another international figure who has done much for the Cape’s landscape is German businessman Prof. Peter Löw. A key figure in the LIVIA investment group, Prof. Löw bought the Stellenbosch based farm of Vergenoegd in 2015, and has engendered an ardent programme of restoration and repair on the various historic buildings on the property.

A recent corporate investment worth mentioning is the sale of Stellenzicht Vineyards, which was bought over by Ernie Els Wines in May 2017. Baron Hans von Staff-Reitzenstein, who has been majority shareholder in Ernie Els wines since 2015, acquired the neighbouring farm and winery from Lusan Holdings. Louis Strydom, MD and winemaker of Ernie Els Wines, explains that although the entire operation is going to reallocate to the Stellenzicht farm, Lusan will continue to own the Stellenzicht name for the next two years whilst it sells existing stock. This, in conjunction with a complete overhaul of the old winery and cellar means that Ernie Els Wines will only be open to the public again somewhere in 2020. Strydom explains that many of the vineyards on the newly purchased property were diseased, and replanting could only take place after conducting an extensive soil analysis.This purchase was undoubtedly a good thing for Stellenzicht, and thus Cape wine.

Another incident in the financial sector to take note of is AdVini’s announcement in April of this year that it has acquired a majority share in Stellenbosch Vineyards. The French wine distribution company, which is also listed on the Paris stock exchange, has already acquired shares in L’Avenir, Ken Forrester Vineyards, Le Bonheur Wine Estate, as well as Maison du Cap. Ken Forrester, who will remain as CEO for the business with the same name, says the acquisition will boost production wine in South Africa and that the partnership is "a fantastic synergy" which will open doors to new international markets.

In addition to this, 2018 has also ushered in the dramatic resurrection of Quoin Rock. Albeit not new on the scene, the wine estate has reopened its doors to the public after six years of meticulous renovation and restoration. The new owner of family-owned farm is headed by Vitaly Gaiduk – originally from Ukraine – who quickly fell in love with the scenic landscape after a chance trip to the Cape winelands in 2012. Dennis Gaiduk, son of Vitaly and Managing Director of the farm, explains that while the previous owners sorely neglected the vineyards and surrounding area during an extended liquidation process, the family has poured enormous energy into improving the estate. “Besides modernising the technology in the cellar”, says Dennis, “we have also hired a new winemaking and viticultural team to oversee the important process of rejuvenating and replanting the vineyards”.

The fact to keep in mind is that well-heeled owners tend to invest in their properties, and these investments survive the tenure of the new owners. Laurence Graff, for instance, has transformed Delaire’s once virus-ridden vineyards and run-down buildings into one of the world’s most striking wine properties we know today. Instances abound where previous wine farm owners simply did not have the necessary capital to care for these prized assets on the level that was required.

Andre Morgenthal, with a history in wine tourism during his career and currently heading up the Old Vine Project, falls squarely into the pro foreign investment camp. He explains that the inflow of foreign capital makes possible the rehabilitation, job creation and further development of wine farms, which is sorely needed for them to reach international standards. Moreover, this is indubitably followed by a whole agricultural sector, one which will provide and sustain employment, as well as further economic spin-off benefits.